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Rediff.com  » Business » RIL and Siemens may snap security-solutions venture

RIL and Siemens may snap security-solutions venture

April 04, 2012 10:23 IST

RILThe grand partnership for homeland security between Reliance Industries and global engineering and electronics giant Siemens may be coming apart in just six months, even before it could formally take off.

Serious differences are believed to have cropped up over strategic and operational issues from technology transfer and sharing to equity structuring of the special purpose vehicles that were planned.

The signs of stress became apparent when both Siemens and RIL did not bid for the much publicised Mumbai homeland security and video surveillance makeover project -- the largest in India so far -- either as consortium partners or separately.

Saturday was the last day for the submission of bids for the Rs 600-800 crore (Rs 6-8- billion) project, involving the installation of 5,000 surveillance cameras across 1,200 locations, video analytics and management, data preservation units, and six command and control centres.

While RIL was to provide its fourth generation seamless telecom bandwidth and project management skills, Siemens was expected to offer its security solutions used globally, from Dubai to London.

Most had expected the alliance to translate into a full-fledged JV, which could even tap overseas opportunities. RIL diversified into the homeland security and aerospace business after roping in Vivek Lall, a former NASA scientist who had steered Boeing's military and commercial division in India for years.

The two companies are expected to seek different partners for future projects in India.

Officials from both sides said even though RIL had informed Siemens that due to technical reasons and stiff guidelines, it would opt out of the Mumbai project, they saw the partnership on the brink of splitting.

"This was a serious play and the highest officials were involved on both sides. Mukesh Ambani and his closest aide Manoj Modi were spearheading this, along with Lall and from Siemens it was no less than Armin Bruck, the India MD.

Even the company's global president and CEO, Peter Löscher, was in the loop as the stakes were quite high. But, I don't see the MoU progressing, really," said an official in the know.

A Siemens India spokesperson said the company had "no comments" to make on the subject.

An RIL spokesperson said, "The consortium of Siemens and RSSL (Reliance Security Solutions Ltd) did not submit the final bid for the Mumbai project due to various commercial aspects related to the project."

According to sources, trouble started when RIL proposed to infuse equity and create a JV company or SPVs for different projects, starting with Mumbai, with it holding majority stake. An SPV was more tax-neutral, RIL had argued and had even got E&Y to do an independent study on the same.

In fact, sources added Modi himself presented this idea to the Siemens brass, some time in February.

The SPV idea also hit a roadblock as the Maharashtra government did not allow such structuring of an IT project.

However, Siemens, which is globally restructuring its JVs, did not want to take up fresh equity positions and preferred a consortium approach.

Analysts said Siemens may have been apprehensive as a JV company would have joint ownership of the solutions, which would have also implied RIL getting access to Siemens' strategic technology and systems architecture.

"RIL even wanted in-depth segment designs and network access, whereas it did not want to share parts of its solution," an official alleged.

RIL, on its own, has also been parallely working with global vendors like Persistence Sentinel, Captiva for video analytics and Picture Intelligence Units, as part of a bigger initiative.

Without equity involvement on technology-sharing, it would be difficult to leverage each other's strengths, making it tough for any JV to sustain, said an RIL official, specifically about the Siemens venture.

The Mumbai project was to be the template for similar mega exercises nationwide.

And many defence and counter terrorism experts saw this to be a new billion-dollar-plus opportunity for companies to tap. Naturally, both companies are exploring other options.

Sources say companies like Mumbai-based systems integrator Allied Digital are now on RIL's radar, while Siemens may approach some Nasdaq-listed entities which have a significant India presence.

Both RIL and Siemens may also look at equity partnerships or even buyouts.

Allied Digital has been shortlisted for the Mumbai project. Nitin Shah, chairman and managing director, told Business Standard, "Since 2005, our SBU, Integrated Solutions, has been designing, maintaining and managing video analytics, surveillance solutions for intelligence buildings and providing command and control solutions for Bombay High and Mumbai International Airport, among others".

Allied, therefore, is a perfect partner for RIL, analysts feel, as both have national plans. Allied Digital company officials even admitted "it will have to hive off the SBU into a separate entity and is open to strategic partnerships in future."

Asked specifically about RIL, Shah did not want to talk specifics.

Arijit Barman & Sanjay Jog in Mumbai
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